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Transmission and Wind Investment in a Deregulated Electricity Industry
Stockholm University, Faculty of Social Sciences, Department of Computer and Systems Sciences. University College London, England.
2015 (English)In: IEEE Transactions on Power Systems, ISSN 0885-8950, Vol. 30, no 3, 1633-1643 p.Article in journal (Refereed) Published
Abstract [en]

Adoption of dispersed renewable energy technologies requires transmission network expansion. Besides the transmission system operator (TSO), restructuring of electricity industries has introduced a merchant investor (MI), who earns congestion rents from constructing new lines. We compare these two market designs via a stochastic bi-level programming model that has either the MI or the TSO making transmission investment decisions at the upper level and power producers determining generation investment and operation at the lower level while facing wind power variability. We find that social welfare is always higher under the TSO because the MI has incentive to boost congestion rents by restricting capacities of transmission lines. Such strategic behavior also limits investment in wind power by producers. However, regardless of the market design (MI or TSO), when producers behave a la Cournot, a higher proportion of energy is produced by wind. In effect, withholding of generation capacity by producers prompts more transmission investment since the TSO aims to increase welfare by subsidizing wind and the MI creates more flow to maximize profit.

Place, publisher, year, edition, pages
2015. Vol. 30, no 3, 1633-1643 p.
Keyword [en]
Market design, mathematical programming with equilibrium constraints (MPEC), transmission, wind power
National Category
Information Systems
Research subject
Computer and Systems Sciences
URN: urn:nbn:se:su:diva-111863DOI: 10.1109/TPWRS.2014.2367107ISI: 000353641000055OAI: diva2:776818
Available from: 2015-01-08 Created: 2015-01-08 Last updated: 2015-06-02Bibliographically approved

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Siddiqui, Afzal
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